Clearwire 2008 Annual Report Download - page 83

s
tockholders’ equity. SFAS No. 1
6
0 also requires any acquisitions or dispositions of non-controlling interests tha
t
do not result in a chan
g
e of control to be accounted for as equit
y
transactions. Further, SFAS No. 1
6
0 requires that a
p
arent recognize a gain or loss in net income when a subsidiary is deconsolidated. SFAS No. 160 is effective for
annual periods beginning on or after December 15, 2008. We will adopt SFAS No. 160 on January 1, 2009 as we
have si
g
nificant non-controllin
g
interests. SFAS No. 1
6
0 will require us to present our non-controllin
g
interests as a
p
art o
f
stoc
kh
o
ld
ers’ equ
i
ty
.
S
FA
S
No. 16
1
—
In March 2008
,
the FASB issued SFAS No. 161
,
D
isc
l
osures a
b
out Deri
v
ati
v
e Instruments
an
d
He
d
ging Activities
,
which we refer to as SFAS No. 1
6
1. SFAS No. 1
6
1 is intended to im
p
rove financial
r
eporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investor
s
t
o better understand their effects on an entity’s financial position, financial performance, and cash flows. It is
e
ffective for financial statements issued for fiscal
y
ears and interim periods be
g
innin
g
after November 15, 2008. We
have not ado
p
ted SFAS No. 161, and we do not ex
p
ect the effects of SFAS No. 161 to have a material effect on our
c
onsolidated financial statements
.
F
SP No.
142
-
3
— In Apr
il
2008, t
h
e FASB
i
ssue
d
FASB Sta
ff
Pos
i
t
i
on, w
hi
c
h
we re
f
er to as FSP, No. 142-3
,
Determination o
f
the Use
f
ul Li
f
eo
f
Intangible Assets
,
which we refer to as FSP No. 142-3. FSP No. 142-3 amend
s
t
h
e
f
actors t
h
at s
h
ou
ld b
e cons
id
ere
di
n
d
eve
l
op
i
ng renewa
l
or extens
i
on assumpt
i
ons use
d
to
d
eterm
i
ne t
h
e use
f
u
l
lif
eo
f
a recogn
i
ze
di
ntang
ibl
e asset un
d
er SFAS No. 142. FSP No. 142-3
i
s
i
nten
d
e
d
to
i
mprove t
h
e cons
i
stency
between the useful life of an intan
g
ible asset determined under SFAS No. 142 and the period of expected cash flows
used to measure the fair value of the asset under SFAS No. 141
,
and other U.S. GAAP. FSP No. 142-3 is effective fo
r
financial statements issued for fiscal years beginning after December 1
5
, 2008, and interim periods within thos
e
fi
sca
ly
ears. We
h
ave not a
d
opte
d
FSP No. 142-3, an
d
we
d
o not expect t
h
ee
ff
ects o
f
FSP No. 142-3 to
h
ave a
m
aterial effect on our consolidated financial statements
.
ITEM 7A.
Q
uant
i
tat
i
ve and
Q
ual
i
tat
i
ve D
i
sclosures About Market R
i
sk
M
ar
k
et r
i
s
ki
st
h
e potent
i
a
ll
oss ar
i
s
i
ng
f
rom a
d
verse c
h
anges
i
n mar
k
et rates an
d
pr
i
ces, suc
h
as
i
nterest rates,
forei
g
n currenc
y
exchan
g
e rates and chan
g
es in the market value of investments.
Interest Rate Risk
Our pr
i
mary
i
nterest rate r
i
s
ki
s assoc
i
ate
d
w
i
t
h
our Sen
i
or Term Loan Fac
ili
ty assume
d
at
f
a
i
rva
l
ue as part o
f
the Closin
g
in the amount of $1.19 billion, net of discount, and the Sprint Tranche entered into on December 1,
2008, related to the reimbursement of $179.2 million of the Sprint Pre-Closing Financing Amount. We have a tota
l
outstanding principal balance of
$
1.41 billion, with a carrying value and an approximate fair market value o
f
$
1.36 billion at December 31, 2008. The rate of interest for borrowin
g
s under the Senior Term Loan Facilit
y
is the
LIBOR base rate plus a mar
g
in of 6.00%, which base rate shall be no lower than 2.7
5
% per annum or the alternat
e
base rate, which is equal to the greater of (a) the Prime Rate or (b) the Federal Funds Effective rate plus
1
⁄
1
2
⁄
⁄
of 1%
,
p
lus a margin of
5
.00%, which base rate shall be no lower than 4.7
5
% per annum. These margin rates increase by
5
0 basis points on each of the sixth, twelfth, and ei
g
hteen month anniversaries of the Closin
g
. At our option, th
e
accrue
di
nterest resu
l
t
i
n
gf
rom t
h
e mar
gi
n
i
ncreases w
ill b
epa
y
a
bl
e
i
n cas
h
or pa
y
a
bl
e
i
n
ki
n
dby
cap
i
ta
li
z
i
n
g
t
he
additional interest and adding it to the outstanding principal amount of the Senior Term Loan Facility. On the secon
d
ann
i
versar
y
o
f
t
h
eC
l
os
i
n
g
,
f
or LIBOR-
b
ase
dl
oans, t
h
e app
li
ca
bl
e mar
gi
n rate w
ill i
ncrease to 14.00% per annu
m
an
df
or a
l
ternate
b
ase rate
l
oans t
h
e app
li
ca
bl
e mar
gi
n rate w
ill i
ncrease to 13.00% per annum. Interest
i
spa
y
a
bl
e
q
uarterl
y
with respect to alternate base rate loans, and with respect to LIBOR-based loans, interest is pa
y
able i
n
arrears at t
h
een
d
o
f
eac
h
app
li
ca
bl
e per
i
o
d
,
b
ut at
l
east every t
h
ree mont
h
s. In a
ddi
t
i
on, on t
h
e secon
d
ann
i
versary o
f
th
eC
l
os
i
ng, we are requ
i
re
d
to pay an amount equa
l
to 4.00% o
f
t
h
e outstan
di
ng pr
i
nc
i
pa
lb
a
l
ance o
f
t
h
e Sen
i
or
Term Loan Facilit
y
. This fee will be paid in kind b
y
capitalizin
g
the amount of the fee and addin
g
it to th
e
outstan
di
ng pr
i
nc
i
pa
l
amount o
f
t
h
e Sen
i
or Term Loan Fac
ili
ty. T
h
e current
i
nterest rate on our Sen
i
or Term Loa
n
F
acility was 8.8% at December 31, 2008. Our semi-variable interest rate has a LIBOR floor of 2.75%. A one percent
increase above the floor would increase our annual interest expense b
y
approximatel
y
$14.1 million per
y
ear.
71